Wednesday, February 1, 2023

France issues a “ unclear and final ” to Carrefour’s takeover bid

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France has reiterated its opposition to the 16.2 billion euro takeover of the Carrefour supermarket group by the Canadian Alimentation Couche-Tard, dealing a major setback to the groups’ hopes of overcoming the government’s concerns over food security and the ’employment.

“My answer is extremely clear: we are not in favor of the agreement,” Bruno Le Maire, French Minister of Finance, said on Friday in an interview with BFM TV. “The no is polite but it is a clear and definitive no.”

The companies had continued negotiations on a deal, according to people familiar with the matter, although the government had already expresses his concerns Wednesday on how the rapprochement would threaten France’s “food sovereignty”.

They discussed commitments on employment, suppliers, governance and management, in addition to the price of € 20 per share of the initial offer. Couche-Tard was prepared to commit € 3 billion of investments in Carrefour over five years, as well as no job cuts for two years, one person said. It would also maintain a listing in Paris and keep Carrefour’s headquarters in France.

Alain Bouchard, co-founder and president of Couche-Tard, had flown to Paris on Thursday in an attempt to secure a meeting with Mr. Le Maire to present the proposal to him, people said.

But Mr Le Maire’s last intervention appeared to be aimed at jeopardizing the deal before he got to his office.

Under French law, the government can control takeovers of domestic companies by foreign buyers in sectors it deems strategic, such as energy, water and telecoms. France has gradually expanded the list of areas covered by the regulation and added “food safety” last year.

“We have the legal tool at our disposal [to block the deal], even if I prefer not to have to use it, ”Mr. Le Maire told BFM TV. “What is at stake is the food security of our country. . . especially after the [Covid-19] the health crisis has taught us that there is no price to pay. “

Carrefour declined to comment and Couche-Tard could not be reached immediately for comment. Shares of Carrefour were down about 4 percent in morning trading.

The proposed merger aims to combine two companies with very different formats and geographic footprints into a retail giant worth more than $ 50 billion and the third largest grocer in the world behind Walmart and Schwarz Group, which owns the German discount Lidl.

The Canadian company wants to diversify its gas station and convenience store activities in the grocery store, while pushing Couche-Tard further in Europe and Latin America.

Carrefour is one of the largest grocery chains in Europe, with around 2,000 supermarkets and over 700 large format hypermarkets in Europe; it is also present in Brazil and Argentina. The group is one of the leading French private employers with more than 100,000 employees.

Philippe Martinez, who heads the leftist union CGT, told France Televisions on Friday that such transactions “often lead to massive job cuts” and were not in “the public interest, nor that of consumers”.

“If the state doesn’t step in at such a time,” he said, “then what’s the point?”

Fabienne Caron, retail analyst at Kepler Cheuvreux, said the French government’s argument that Carrefour was central to the country’s food security made no sense. The group has only 20 percent of the grocery market in the domestic market and foreign companies such as Lidl operate there without a problem.

She said in a note that her objection was “all about politics,” adding: “The deal is too close to presidential elections and the risk of giving favorable winds to the far-right party is too great.”

If it were maintained, the government’s position would mean that “food distributors in France cannot be taken over, that is to say neither Carrefour nor Casino”. Ms. Caron pointed out that the consolidation of the French grocery market had already encountered competition concerns, referring to the time when two other French supermarket groups, Système U and Auchan, had sought to cooperate on purchases in 2015 for regulators to refuse.

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